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Stocks in London tipped into the red at the close on Tuesday after a strong session for the natural resources sector couldn't quite balance out a disappointing day for retailers.
The FTSE 100 index closed down 9.29 points, or 0.1%, at 7,598.93. The FTSE 250 ended down 107.37 points, or 0.5%, at 20,399.43, and the AIM All-Share closed down 6.61 points, or 0.7%, at 972.99.
The Cboe UK 100 ended down 0.2% at 757.31, the Cboe UK 250 closed down 0.6% at 18,096.59, and the Cboe Small Companies ended down 0.2% at 14,757.50.
In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended down 0.7%.
After a strong start to the week, the mood darkened on Tuesday as inflation and interest rate worries swirled.
The UK services sector saw its weakest performance for over a year in May as rising inflation dented customer demand, according to S&P Global.
The S&P Global-CIPS UK services purchasing managers' index printed 53.4 points in May, up from the preliminary reading of 51.8, but down sharply from 58.9 in April. The latest reading was the worst final tally since February 2021.
And ahead of Thursday's monetary policy decision from the European Central Bank, the Australia's central bank on Tuesday hiked interest rates more than expected.
The Reserve Bank of Australia upped its main lending rate by half a percentage point to 0.85%. It also increased the interest rate on exchange settlement balances by 50 basis points to 75 basis points.
Governor Philip Lowe pointed to ‘significant’ inflation rises as the reason behind the bank's move.
While European stocks stumbled, London's FTSE 100 index was spared deeper losses thanks to its heavyweight oil and mining sector.
Miners were given a boost after a raft of upgrades from investment bank Jefferies. Jefferies upgraded Rio Tinto, BHP Group, Anglo American and South32 to Buy.
Rio Tinto shares ended up 2.3%, BHP up 1.9%, Anglo American rose 1.3% and South32 up 1.6%.
Oil majors BP and Shell rose 1.4% and 0.9% respectively. In the FTSE 250, oil and gas firm Capricorn Energy rose 2.9%.
Brent oil was quoted at $120.11 a barrel at the London equities close Tuesday, up from $119.27 late Monday.
This was all helping to counterbalance a downbeat session for retailers. JD Sports ended at the bottom of the FTSE 100, down 3.9%, after the athleisure seller, Rangers Football Club and the latter's branded clothing manufacturer were provisionally found guilty of price-fixing.
JD Sports said it plans to recognise a £2 million provision in its financial statements for the year ended January 29. The figure is the retailer's ‘best estimate’ for the liabilities involved with the matter, including legal costs.
Meanwhile, DIY retailer Kingfisher fell 3.4% and clothing & homewares seller Next declined 1.1%. In the FTSE 250, Marks & Spencer shed 2.9%.
Casting a shadow over the sector was US general merchandise retailer Target, which again spooked the market with a margin warning. Shares in Target were down 4.0% in midday New York trade.
For the second quarter, it expects an operating margin rate around 2%. Back in its quarterly results for the three months ended April 30, the retailer had forecast a second quarter operating margin rate ‘in a wide range’ centred around the first quarter's rate of 5.3%.
Further damping the mood towards the retail sector was news that the preferred bidder for upmarket clothing retailer Ted Baker has walked away. The bidder, whom Ted Baker hasn't named, indicated that its reason for not proceeding was not linked to its due diligence review of the company, Ted Baker explained.
The London-based seller of clothing and accessories said it will now go back and look at other proposals received as part of its formal sale process, but there can be no certainty that an offer will be made.
Shares in Ted Baker slumped 18%.
Elsewhere, shares in National Express dropped 9.5% despite the transport provide saying revenue is close to its 2019 pre-pandemic levels, putting it on track to deliver nearly £3 billion annual revenue in 2022.
Biffa shares bounced 27% after receiving a takeover proposal, which it would be ‘minded to recommend’ should it lead to a firm takeover offer.
The waste management firm also said current trading is in line with expectations, though it is currently facing a probe related to UK landfill tax laws. While there is no guarantee a claim could be brought against it, Biffa estimated a maximum hit of £153 million, plus penalties and interest.
Stocks in New York were lower at the London equities close, with the DJIA down 0.1%, the S&P 500 index down 0.1%, and the Nasdaq Composite down 0.1%.
The pound was quoted at $1.2576 at the London equities close Tuesday, up compared to $1.2528 at the close on Monday.
Sterling wobbled during Tuesday's session following UK Prime Minister Boris Johnson's survival of a bruising confidence ballot, but recovered in the afternoon.
The prime minister insisted he had secured a ‘decisive’ victory despite 148 of his own MPs voting to oust him on Monday night, arguing the government could now ‘move on’ and focus on what ‘really matters to people’.
Tory MPs voted by 211 to 148 in support of the prime minister on Monday, but the scale of the revolt against his leadership left him wounded. When Theresa May faced a confidence vote in 2018 she secured the support of 63% of her MPs, but was still forced out within six months.
Johnson saw 41% of his MPs vote against him, a worse result than May.
The euro stood at $1.0692 at the European equities close Tuesday, higher against $1.0688 at the same time on Monday.
Against the yen, the dollar was trading at JP¥132.57, up compared to JP¥131.61 late Monday. The yen was trading around its worst levels in two decades.
Gold was quoted at $1,850.60 an ounce at the London equities close Tuesday against $1,844.10 at the close on Monday.
Wednesday's economic calendar has UK Halifax house prices at 0700 BST and eurozone GDP at 1000 BST.
The corporate calendar on Wednesday has full-year results from industrial software firm Aveva, budget airline Wizz Air and flexible-office-space provider Workspace Group.
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